Montenegro budgets loan guarantees for aluminum plant

BELGRADE, March 16 (Reuters) - Montenegro's government said on Tuesday that it had budgeted 85 million euros for loan guarantees to its sole aluminium producer Kombinat Aluminijum Podgorica (KAP).

Of the total 85 million euros, 22 million will back a new loan to secure production in KAP, while another 63 million euros will be used to reschedule previous debt, the finance ministry said in a statement.

"KAP is currently in the process of negotiating a 22 million euro loan with creditors," the statement said.

The KAP facility, a key driver of Montenegro's economy, has run losses since global metals prices fell last year. In the past it has contributed more than 15 percent of the gross domestic product; it accounted for 41 percent of exports in the first eight months of 2009.

In November, the finance ministry said the government had guaranteed a 49.7 million euro ($74 million) loan from OTP Bank  to KAP.

That month, EN+, owned by Russian tycoon Oleg Deripaska, said the government of Montenegro would issue guarantees up to 135 million euros to cover loan repayment and redundancy.

In return EN+ agreed to transfer a half of its stake to the government.

(Reporting by Ivana Sekularac; Editing by Adam Tanner and Will Waterman)